The significant drop-out rate is due to the risky nature of spread-betting, Akshay Kapoor, business and product development director at Gekko Markets told CNBC in a phone interview.
"The spread-betting market does not grow because clients burn out. The problem is a lot of people trade with very high leverage. A lot of them trade too aggressively and too often. It is psychological, all of us think we can perform better than the market," he said.
Tax benefits a 'no brainer'
Profits from spread-betting are not taxable under U.K. laws as the ownership of an asset is not being transferred.
The tax status of spread-betting has earned the practise a controversial reputation, but has also attracted clients.
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Despite the high drop-out rate of spread-betters, the market continues to attract new clients and bring back old ones. In 2013, 12,000 new clients joined the pool while 22,000 dormant betters resumed trading, according to Investment Trends.
Speaking on condition of anonymity, one trader told CNBC he uses spread-betting because of its favorable tax status.
"Spread-betting primarily was for tax reasons. The big advantage is you don't have to pay capital gains tax. So it is a no-brainer to be part of this market," he said.
The spread-betting market is very small, but many companies see huge potential to grow by attracting clients from traditional stock brokers.
Asset growth for the execution only sector, those stockbrokers that do not offer advice on investment, was 7.1 percent this quarter, continuing an unbroken spell of growth stretching back to the second quarter of 2012,
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The wealth management sector as a whole in the U.K. manages £600 billion, according to research firm Compeer. Based on a pool of 1,000 investors with between £50,000 and £1 million of investable assets, 39 percent who receive advisory or discretionary investment services said that they were "likely" to invest without advice.
Gekko Markets' Kapoor told CNBC that this presents huge potential for spread-betting companies.
"If even half of these people switch, the value of assets in the self-directed space could double or triple and that is where the most important potential is for companies in that space."